The urgency of the European crisis has stimulated debate on the ‘The road to Europe’ in the Italian daily Il Manifesto and on a website committed to economic alternatives, Sbilanciamoci. openDemocracy joins this debate, beginning with three opening contributions this week from Rossana Rossanda, Mario Pianta and Donatella della Porta. We invite your responses both in comments and article submissions:
The financial crisis in Europe is the one that worries most people and certainly takes up the most space in the press: but it is not the only one. People are right to worry about finance because the present financial mess translates into real life as high youth unemployment, deep cuts in public services and all kinds of austerity measures which are destined to make the crisis worse.
We are also in the midst of a grave crisis of inequality. Wealth in Europe and especially in the United States has not been so skewed since the 1920s or 1930s. The “Indignados” are absolutely right to identify themselves as the “99 %”: they understand that the top one per cent has increased its income enormously while everyone else has been losing.
In my view, however, the most serious crisis is the one we talk the least about—this is global warming and climate change. The climate crisis will have the deepest effects on civilisation itself and will make our financial worries look trivial in comparison.
Let me try to explain what I’m talking about with an image. Imagine that the world is governed by concentric circles or spheres of power, with the most powerful one on the outside. Today, the most powerful circle, the one with the most influence on our lives, is finance. Globalised finance is literally running the world - look at how much money the banks have received from governments, which is to say taxpayers, you and me. A recent report from the Federal Reserve put the amount that the Fed itself spent to bail out the banks at $16,000,000,000,000, sixteen trillion dollars. That doesn’t include what the British, the Germans, the French, the Italians and so on spent on their own banks. I do not know of any complete figures. Imagine that every dollar spent by the Fed to save the bank is one second on your watch. Sixteen trillion dollars in seconds would come to more than 500,000 years.
The banks spent a huge amount on lobbying so that governments would remove all restrictions on their activities. This deregulation contributed a lot to the crisis - the banks took big risks with your money and mine. From their point of view, there was nothing wrong with this - they were ‘too big to fail’ and they knew that governments would have to step in to save them if there was a crash. They also borrowed enormously - often taking risks of more than 30 or 40 dollars for every dollar that was actually theirs. But they were bailed out with absolutely no conditions. They did not have to change anything and they are still too big to fail.
So finance is definitely our most powerful circle, on the outside. The next circle of power is the real economy where real people invest, produce, distribute and consume. In the United States, this real economy only receives about 20 per cent of available investment - the rest goes directly into the financial sector.
Marx based his analysis on the real economy: the industrialist made profits by producing real goods and services, exploiting the workers in the process and collecting the surplus value for himself. Today, you don’t need the real economy to make money. In fact, over the past twenty years or so, you could make much more by betting directly on financial products and selling the same financial product over and over again.
The third circle of power is society, including governments which have to obey the rules of finance and of the economy. Governments obey these rules rather than making finance and the economy obey them so that the people benefit. Social benefit systems and even health and education are under attack everywhere, even in Europe which is supposed to be the richest continent. Governments have become far more indebted over the past three or four years, largely because of all the funds they had to put into saving the banks. Now the people are expected to pay back once more - they have already paid to bail out the banks and now they must pay again because government debts are too high.
The final circle is the environment, the biosphere. It is very small compared to the other three and most governments now see taking care of it as some sort of luxury they cannot afford. This is short-sighted and tragic.
You will not be surprised when I tell you that the solution to all our problems today is simple to state and extremely hard to accomplish. It is the first time in human history that people have been called upon to carry out such a fundamental change. We have to reverse the order of the circles I have just described.
The Biosphere has to come first and be the most powerful of the circles because it is the most powerful. We can’t fight the laws of physics and chemistry and if we try we are sure to lose. I never talk about ‘saving the planet’ because the planet will take care of itself, as it has done for four and a half billion years. The question is not whether the planet will survive but whether humans as a species will survive on it. The climate conference in Durban at the end of next month looks like being another colossal failure, in the image of Copenhagen or Cancun.
Soon it will be too late, if this is not the case already. Perfectly serious scientists are now suggesting that the temperature increase could reach four or five degrees Celsius and that this would literally decimate the human population. ‘Decimate’ means divide by ten and ten percent of it is about how many would then remain. We don’t know under what sort of conditions either: probably not peaceful ones to say the least.
The second circle would be Society - a democratically organised society in which governments would be answerable to their people and people were the basis of all authority. Real democracy is not possible for as long as governments are governing on behalf of the financial system.
The next, third circle would be the real economy with a genuine investment in jobs, in education and health and with a high level of public spending and far more equal revenue distribution and taxation systems. I prefer not to say ‘socialist’ or ‘communist’ or any other supposedly perfect type of society because I am extremely wary of people and parties which think they know, already, exactly how free future societies must be organised. I hope there will be a variety of organisational types to fit different cultures, histories and preferences. I want to conserve biodiversity and I think sociodiversity is a positive value.
Finally we would have finance, the smallest, weakest of the four circles - simply a tool, one among many, at the service of the real economy, society and the biosphere.
Not a Utopian project at all
This is not, repeat not, a utopian project. It is perfectly feasible if we the people could wrest control away from the financial system. As the financial crisis became deeper in 2007-2008, I began to write about how we had to use the financial crisis to solve the other two grave crises of economic and social inequality and the climate crisis. This would mean taking control over finance and investing immediately in a green, job creating transition and going after the money where it is - with the people and corporations now at the very top. Worldwide, the one percent of the top one per cent - people whose liquid assets - not houses, automobiles etc but cash - amount to $35 million or more. Collectively their fortune comes to $15 trillion - nearly what the Fed spent bailing out the banks. They too lost money during 2008-2009, but have now bounced back by more than 25 percent.
A social and green transition also means we have to socialise the banks. (I say socialise and not nationalise because the government would have part of the authority but citizens, bank employees and customers would also have their say.) The banks should then lend to small and medium sized firms in particular with an environmentally innovative project and to families that want to buy or build energy-saving or energy neutral houses.
Many studies have shown that an ecological economy is also a job-creating economy, and at all levels of society, from construction workers to world-class scientists. The other priority for socialised banks would be to extend credit to social enterprise, companies with some form of worker control. No law says democracy has to stop at the edge of the economy: the economy needs to be democratised. Banks should be seen as part of the public service network. Small and medium businesses are at present starved for credit.
Instead of bailing out failing companies to do exactly what they were doing before - for example producing automobiles - pay the personnel, workers, engineers and so on to devise new products that would be the most socially useful and that they could produce in their present workspaces. We spent centuries neglecting the creativity of half the human race, which is to say women, and we are still neglecting the creativity, or nearly all of it, of working people.
There are many other steps to take that would take too long to describe in detail. So let me just list them:
- Change the statutes and the mandate of the European Central Bank so that it lends directly to governments, not to banks, which then lend to governments at higher interest rates. The ECB should not just ‘control inflation’ [now its only task] but foster job creation.
- Issue Eurobonds and devote the investments to intra-European clean energy and transport networks;
- Create a European tax on all financial transactions including currencies, stocks, bonds and derivatives at 1 basis point [1/1000];
- Shut down tax havens;
- Cancel all African debt owed to Europe but in exchange for reforestation projects with local direction and participation that can be monitored [a “debt for climate swap”];
- Revisit all free trade agreements and choose the elements that favour human, labour and environmental rights while scrapping the others; give preference to fair trade products [monitored];
Never forget that the banks are ours, quite literally. As taxpayers, we have paid for them with our money and they would no longer exist if we had not done so. So don’t be afraid to say so! Otherwise, we will continue to live in a moral crisis as well as a financial, social and ecological crisis. So far, we have rewarded the guilty and punished the innocent. It is high time to turn that around too.